State-chartered savings and loan associations in Maryland, as in three other states, fall under a system of dual supervision -- they are watched by both the state and their insurers.

The state agency that watches S&Ls is the one that issues the state charters. In Maryland, the Board of Savings and Loan Commissioners performs that job, setting the standards that S&Ls must meet to win a state charter. For example, Maryland requires that all S&Ls have some kind of insurance, but lets the institutions choose whether to apply for federal or private insurance.

The nine commissioners are appointed by the governor, and act as the state equivalent of the Federal Home Loan Bank Board.

Board members meet regularly to set policy, set standards and decide how to handle a specific crisis. Daily regulatory operations such as routine examination of individual institutions are run by the board's division of savings and loan associations, under the direction of Charles Brown.

The insurer of a state-chartered institution can be the federal government or a private corporation, mutually owned by the member S&Ls. The federal agency is the Federal Savings and Loan Insurance Corp., known as the FSLIC. In Maryland, the private organization is the Maryland Savings-Share Insurance Corp., the MSSIC, which yesterday was appointed conservator to oversee the affairs of Old Court Savings and Loan Association.

The MSSIC is a private corporation created by state law. It is not an instrument of the state and does not have the state's financial backing. The MSSIC is run by a board of directors. Three members of the board are appointed by the governor and eight are nominated by members of the member associations.

The state agency and the insurer monitor an S&L's condition and activities to make sure it is run properly. The state watches to make sure the savings and loan association follows the law and does not violate the terms of its charter. The insurer wants to make sure it is not exposed to undue risk.

Because of their shared concerns, the two agencies work closely together, sharing information about S&L activities, potential problems, investigations and, if necessary, deciding how to handle an S&L crisis.

In the case of Old Court, the Board of S&L Commissioners, represented by the state attorney general, filed a petition with the court asking that the MSSIC be named conservator of Old Court.

If approved by the court, the MSSIC will run the S&L, seeking to preserve the status quo.

If the conservator cannot straighten out Old Court's problems, if a liquidation is needed, or if a buyer is found for the institution and the stockholders refuse to approve a merger, the Board of S&L Commissioners may ask the court to appoint a receiver.